Rents and occupancy

All-Industrial rental index fell for the 13th consecutive quarter, at -0.1% QOQ, same as Q1 2018, signaling a stabilisation. This brings the All-Industrial Rental Index to 13.6% below the peak in Q2 2014.

In particular, rents for multiple-user factory rose for the first time since Q1 2015, by 0.2% QOQ. We note that rents for Multiple-User Factory Space in the North planning region rose 3.6% QOQ, where two projects - Nordcom Two at Gambas Crescent (69,600 sqm) and Woodlands Connection (13,300sqm) were completed in Q2 2018. We believe the rental increase may be a one-off as there is abundant space in the North and vacancy for multi-user factory in the North Region remained high at 18.0%.

Rents for business park space have increased for the 5th consecutive quarter, albeit at a slower rate of 0.5% QOQ, compared with 2.4% growth in Q1 2018. The business park sector remains segmented, with newer properties in choice locations remaining popular while older ones are still struggling to fill up. This could explain why Business Park rents have risen for five consecutive quarters (cumulative increase of 7.5%) but occupancy has actually fallen for the third quarter, to 15%.

Single-user factory continued to see the highest rate of decline among all types in Q2, falling for the 4th consecutive quarter. It fell at an increasing rate, by 1.6% QOQ, compared to 0.8% QOQ in Q1 2018. This could be due to the large amount of existing stock as well as upcoming supply.

Rents for warehouses continued the downward trend at 0.5% QOQ due to the large amount of supply that came on-stream in 2017 and first half of 2018.

Prices

Industrial price index stabilised after 12 consecutive quarters of declines, led by positive uptick in centralised properties and those with more than 60 years leasehold tenure.

Future supply

Future supply is set to ease from the record supply of 20.9 million sqft (net lettable area) completed in 2017. The industrial stock completions in H1 2018 were relatively low at 3.2 million sqft (net lettable area). JTC expects another 11.6 million sq ft (gross lettable area) of industrial space, including 7.7 million sq ft of single-user factory space, to be completed in the second half of 2018. Assuming 80-90% efficiency, the new supply would roughly work out to be 9-10 million sqft of net floor area. New supply will ease further in 2019 with only 9.7 million sq ft (gross) of industrial space across all types expected to come on-stream.